Size Matters for Netflix Investors

Netflix investors have a one-track mind—and the company is finally taking advantage of that. The Internet-video streaming service said late Monday that its domestic contribution margin—a measure of profitability—would shrink in the fourth quarter. Netflix set the midpoint of its guidance at 23.2%, compared with 23.7% in the third quarter.

This would mark the first quarterly decline in this number since Netflix began breaking out its business segments two years ago. Yet investors didn't bat an eyelash: The stock surged...